Securities and Exchange Commission of Pakistan has approved a reform roadmap aimed at reviving Pakistan’s underdeveloped Exchange Traded Fund market, introducing changes designed to improve investor access, reduce costs, and widen market participation. The plan, announced in a press release dated April 28, will be implemented in phases and is based on recommendations developed by the Working Committee on Exchange Traded Funds after consultations with Pakistan Stock Exchange, National Clearing Company of Pakistan Limited, Central Depository Company, Mutual Funds Association of Pakistan, brokers, and asset management companies.
Under the new framework, asset management companies will be allowed to offer Exchange Traded Funds directly to investors, moving beyond the existing model where investments are largely routed through securities brokers. Asset management companies will also be able to facilitate brokerage account openings for investors, allowing access to these funds through their own digital onboarding platforms. The regulator said this move is intended to simplify the investment process and expand outreach to retail investors.
The roadmap also introduces a fee-sharing model under which asset management companies can share part of their management fees with brokers involved in distributing Exchange Traded Funds. In another key change, securities brokers will be allowed to launch and manage Exchange Traded Funds for the first time, which SECP says could reduce layered management costs and introduce more product options into the market. Passive investment products such as Index Tracker Funds and Exchange Traded Funds are also being proposed for inclusion in the Voluntary Pension System, offering long-term investors lower-cost alternatives compared to traditional equity-based pension funds.
The reforms come as Pakistan’s capital market regulator seeks to increase market depth and liquidity by improving access to diversified investment products. Exchange Traded Funds remain a relatively small segment of Pakistan’s investment market compared to mutual funds and direct equity trading. With operational changes and investor awareness initiatives planned alongside the reforms, the regulator is aiming to bring more retail and institutional participation into this segment of the market.
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